Price Determination under Monopoly
Monopoly is that market form in which a single producer controls the whole supply of a single commodity which has no close substitute.From this definition there are two points that must be noted: (i) Single Producer: There must be only one producer who may be anindividual, a partnership firm or a joint stock company.Thus single firmconstitutes the industry.The distinction between firm and industry disappearsunder conditions of monopoly. (ii) No Close Substitute: The commodity produced by the producer must have no closely competing substitutes, if he is to be called a monopolist.This ensuresthat there is no rival of the monopolist.Therefore, the cross elasticity ofdemand between the product of the monopolist and the product of any otherproducer must be very low.

PRICE-OUTPUT DETERMINATION UNDER MONOPOLY:A firm under monopoly faces a downward sloping demand curve or average revenuecurve.Further, in monopoly, since average revenue falls as more units of output are sold,the marginal revenue is less than the average revenue.In other words, under monopolythe MR curve lies below the AR curve. The Equilibrium level in monopoly is that level of output in which marginal revenueequals marginal cost.The producer will continue producer as long as marginal revenueexceeds the marginal cost.At the point where MR is equal to MC the profit will bemaximum and beyond this point the producer will stop producing. It can be seen from the diagram that up till OM output, marginal revenue is greater thanmarginal cost, but beyond OM the marginal revenue is less than marginal cost.Therefore, the monopolist will be in equilibrium at output OM where marginal revenue isequal to marginal cost and the profits are the greatest.The corresponding price in thediagram is MP’ or OP.It can be seen from the diagram at output OM, while MP’ is the average revenue, ML is the average cost, therefore, P’L is the profit per unit.Now the total profit is equal to P’L...

YOU MAY ALSO FIND THESE DOCUMENTS HELPFUL

...Because the U.S. postal service is a monopoly and Congress sets postal prices through legislation, market forces do not determine stamp prices.
c. New York City government auctions taxi medallions that give the right to transport passengers by taxi. Because the government controls the number of medallions, market forces do not determine their price.
3. Indicate whether each of the following statements describes an increase in demand, decrease in demand, change in quantity demanded, increase in supply, decrease in supply, or change in quantity supplied in the given market.
a. Store-brand soup prices are cut, reducing sales of Campbell’s soup. Market: Campbell’s soup.
b. Coffee bean prices hit an 18-month low following a bountiful harvest. Market: coffee beans.
c. A summer heat wave leads to higher prices for bottled water. Market: bottled water.
d. Holiday clothing discounts boost clothing sales. Market: clothing.
e. Apple introduces a tinier and more powerful iPod model. Market: older iPod models.
f. The cost of pesticides increases, leading to a rise in the price of soy beans. Market: soy beans.
4. Given the following data for individuals, draw the market demand curve and market supply curve for CDs. Assume that these are the only individuals in the entire...

...﻿
JWI 515: Assignment Four: Price Discrimination
Amusement Parks
Professor Serluco
Managerial Economics
Charles W. Slaven
November 30th, 2014
Introduction
Consider these Amusement park pricing scenarios:
Six Flags Discovery kingdom sells its annual season pass for $59.99. According to its website, “Buy your Season Pass for $59.99, just $14 more than a one-day admission.”
Bush Gardens Dark Continent. sells its Fun Card for $95.00. According to its website, “Pay for a Day, Get now through 2015 FREE.”,
Now why would they give away an unlimited entry annual pass for an extra 25% over the single entry price?
What is common in these pricing scenarios?
All these businesses are practicing what economists call, “Metered Price Discrimination“, or what marketers describe as, “Customer Margin”. It all starts with, “price discrimination” – charging different customers different prices.
Customers differ in the value they get from a product/service and in how much they are willing to pay for it. For each price point you set, there will be different number of customers willing to pay that price. That is your demand curve. The goal is to find the price that maximizes profit. There are many different ways to monetize the customer and Amusement parks offer us a great opportunity to examine several of them. As in the example above, Amusement Parks employ multiple...

...Introduction
Over the past five years or so, house prices in the UK have been constantly changing. At times, house prices being on a rapid increase and at other times falling. This leads to a possibility of negative house equity. As per Sloman and Garratt: “negative house equity is whereby the outstanding value of a mortgage is greater than the value of property against which it is secured.” (Text Book) Supply and demand are the main determinants of houseprices, as the equilibrium of house prices will fall if demand rises and supply falls. An important characteristic of UK house prices identified from the UK house price inflation chart is the tendency of prices to rise over the long term, more quickly than incomes and consumer prices. This rise is because demand has grown faster than supply. There are several factors involving supply and demand analysis which I think have been important in affecting house prices in the UK over the past few years – These factors are: the change in incomes, the cost and availability of mortgages, speculation and consumer confidence.
Incomes
From 2004 until 2007 the UK has been in an economic ‘boom’ with rapidly increasing incomes and an annual rate of house price inflation exceeding 25% around 2004, as shown in the house price % change graph. “As average living standards rise, the...

...﻿Price
Marketing is defined as the “activities that direct the flow of goods and services from producers to consumers” . The process of marketing involves planning and employing an array of methods known as the marketing mix (price, place, promotion, and product). An aspect of the marketing mix is price, which is the value received by a business in exchange for its goods . Pricing is thought to be the most crucial factor of marketing mix, as it is directly correlated with revenue and profitability . Therefore, one of the most significant marketing decisions a company has to make is establishing a solid pricing strategy.
Even though it may seem that price is only about a figure, it is a multidimensional subject that can make the difference between success and failure of an enterprise. There is a series of factors that determine the price of a product, most important of which is the balance between supply and demand, strong and effective competition or the lack of it, and production cost . Nevertheless, corporation’s pricing objectives such as premium, volume, and profitability pricing can influence the price of goods as well . Thus, it can be inferred that price is an element which fluctuates dynamically.
When it comes to setting a price for their merchandise, companies can choose from a considerable range of different pricing strategies. To illustrate one of...

...﻿PricePrice which means that the amount of payment for goods and services given in money term. Price also is the total values for consumers exchange for the benefit for their satisfaction by using or having the product or service. Price decisions must focus on product design, promotion costs, distribution and more mixed, forming a valid imploded marketing plan. In arrange the price of a product, marketers must use the pricing strategy. However, use the pricing strategy not only can fascinate more customers to enjoy our service, it also can help organizations to receive profits from the service. So, marketers must think to choose a correct pricing strategy in order to become a long-term production organization.
There are many treatment type or service provided by HerbaLine. The first one is relaxing facial treatment which contain about RM 69.00. Moreover, HerbaLine also provide dead cells removal and moisturizing treatment for about 90 minit which the price is RM 85.00. The next service is face moisturing and hydrating treatment which cost RM 135.00 if done with special treatment such as Nano Bio-Cellulose Eye Mask Treatment then if without Nano Bio-Cellulose Eye Mask then the price will become RM 99.00. Cell rejuvenating and moisturizing treatment also one of the HerbaLine treatment which consists of RM 165.00 if without special service then costRM133.00 only. The following...

...Advantages and disadvantages of price wars for different social groups
By Nelson Rodriguez
Price war is a situation in which rivals companies try to increase the number of consumers by attracting those who are buying from other companies through price lowering (This is common for commodity products that are so similar that price reduction may look as the only alternative to gain more customers).After each reduction there is a period of stability in which all afferents have the same price, but this equilibrium is soon broken by a new price reduction thrown by the most ambitious firm, the other companies will inevitably fall into this spiral process until they can play no more, as a result only the strongest companies get to the final stages of price war. Enterprises compete with prices as a fast and apparently simple way to win over their competitor’s market; big companies can sell at cost to sink their counter parts, usually because they can produce at lower costs and/or because they can go on for longer periods with very low or no profit. According to this strategy the final control of the market will compensate the looses underwent during the process (although it seems that most economist agree on avoiding price war and looking for alternative ways to increase competitiveness).
In the short term price wars...

...3 price discrimination
With the rapid development of economy and market, the price discrimination phenomenon is more and more universal and the form is more and more multiple.
Price discrimination refers to companies selling exactly the same or similar production to different customers at different prices.
1In November 2006, the major IT Web site noted, Lenovo in the United States launched a holiday promotion, and four models of ThinkPad were under undercut. TP R60 price was down from $ 640 to $ 565, the maximum price decrease of 33% and 42% respectively. The discount in United States was bigger compared to China. (xueqin Tong, yunyun Huang, Special case of price discrimination, June 2007).
2As we all know, the global laptop PC market in general is not the monopoly structure,
there are many well-known brand laptops, such as Asus, Apple and HP.
Lenovo's TP Series laptop is different. ThinkPad is originally created by IBM high-end business laptop. Consumers’ awareness of TP is the leader of laptops and it represents high-end, technical, excellence, honour, and identity.
TP series are not cost-effective terms. There are not so many companies competing with TP. It is also difficult for other computer companies to collude with TP and to create an avenue, so the ThinkPad series are more influential in the market. Lenovo TP pricing strategy at China and abroad...

...REFERENCES................................................................-9-
1. Introduction:
Price discrimination happens when an organization or firm considers different price strategies for the same or identical goods to different groups of customers. This customer groupism based upon on certain attributes and accordingly they charge different price. For an example, Mercedez-Benz when it introduced 190 Sedan in the United States of America, it was sold for $26000 compared to West Germany where it was sold for $12000. Pharmaceutical companies fix different rates for the same drug in different countries. Senior citizens are offered lower fares in bus and movie theatres. These are a few common examples for price discrimination.
2. Conditions necessary for profitable price discrimination:
A firm’s profit rises significantly by adopting price discrimination. To practice price discrimination profitably three conditions must be satisfied.
➢ The firm should be a price maker:
Let us suppose the supplier of the good is a price taker. In such a case, all the consumers would pay the same price for the supplier’s goods. Charging different prices to different customers would be of no value and so the best they can do is charge everyone their common willingness. But if a price maker foolows this...